GBP to USD Forecasts: A Return to $1.2150 in the Hands of the BoE

It is a quiet day ahead for the GBP/USD. There are no UK economic indicators to provide the GBP/USD with direction. The lack of stats will leave the GBP/USD in the hands of market risk sentiment.

However, Bank of England commentary will draw plenty of interest late in the day. Chief Economist Huw Pill will host a fireside chat at the Warwick Think Tank on the UK economy (1700 BST).

It has been a busy week on the economic data front. Following the latest wage growth and inflation numbers, Huw Pill will likely touch on the latest stats and the implications for the UK economy and monetary policy.

GBP/USD Price Action

At the time of writing, the GBP/USD was up 0.08% to $1.20331. A mixed start to the day saw the GBP/USD fall to an early low of $1.20215 before rising to a high of $1.20367.

Technical Indicators

The Pound needs to move through the $1.2065 pivot to target the First Major Resistance Level (R1) at $1.2140. A return to $1.21 would signal an extended breakout session. However, the Pound would need US economic indicators and hawkish MPC member chatter to support a breakout session.

In the event of an extended rally, the GBP to USD would likely test resistance at the Wednesday high of $1.21813 but fall short of the Second Major Resistance Level (R2) at $1.2256. The Third Major Resistance Level sits at $1.2448.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1948 in play. However, barring a data-off-fueled sell-off, the GBP/USD should avoid sub-$1.19 and the second Major Support Level (S2) at $1.1873.

The Third Major Support Level (S3) sits at $1.1681.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.21220. The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA pulled back the 200-day EMA after the Wednesday bearish cross, delivering bullish signals.

A move through the 50-day ($1.21220) would support a breakout from R1 ($1.2140) to bring the 100-day ($1.21624) and 200-day ($1.21659) EMAs into play. However, failure to move through the 50-day EMA ($1.21220) would support a slide through S1 ($1.1948) to test support at $1.19.

The US Session

It is a busy day on the US economic calendar. Following the US CPI Report on Tuesday, investor focus shifts to US wholesale inflation numbers for January and the weekly jobless claims figures.

With the markets expecting the Fed to push rates above 5%, softer inflation numbers and a spike in jobless claims could test the theory.

Other stats include housing sector numbers and the Philly Fed Manufacturing PMI. An unexpected slide in the headline PMI and a jump in prices paid would influence market risk sentiment.

FOMC member speeches will also need consideration, with members Loretta Mester and James Bullard speaking today. A shift in forward guidance would move the dial.